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Thursday, 21 July 16
CONSTRUCTIVE TOTAL LOSS: WHAT GOES IN TO CALCULATING QUANTUM? - HILL DICKINSON
 KNOWLEDGE TO ELEVATE
The Commercial Court recently delivered its judgment in an important case (Connect Shipping Inc and Machrimar Management SA -v- Sveriges Anfgartygs Assurans Forening (The Swedish Club) and others) [2016] EWHC 1580 (Comm), interpreting the law around the obligations of insurers and the rights of owners in relation to the total loss of a vessel.
The case is authority for the proposition that a NOA tendered five-and-a-half months after the casualty is not necessarily late, considering the fact-sensitive nature of the legal right exercised by the shipowner of abandoning his vessel to his insurers. It confirmed that reasonable expenditure incurred before the issue of a Notice of Abandonment can be included in the calculation of quantum for a CTL, as well as the owners’ share of SCOPIC. Further, the Court followed the finding in another important recent decision – the “BRILLANTE VIRTUOSO” – that inevitable uncertainty about the cost of potential repairs should permit that calculation to include a significant contingency (10% in this case).
In the event, the Owners of the vessel the “RENOS”, represented by Hill Dickinson International, were successful in claiming of the Insurers their relevant proportions of the US$12 million under the hull policy (plus sue and labour costs), and triggering a further US$3 million Increased Value policy claim.
The High Court ruled that the vessel was a constructive total loss following a fire that broke out in the engine room whilst the Vessel was sailing in a laden condition of the Egyptian coast, in the Red Sea. It was common ground that the fire was an insured peril under the policies and that it caused extensive damage to the Vessel, resulting in her loss of main engine power and requiring tug assistance. The dispute concerned the measure of the indemnity to which the Owners were entitled.
The Insurers denied the Vessel was a constructive total loss as a matter of quantum, contending that the Owners were entitled to an indemnity on a partial loss basis. Owners therefore brought proceedings in the High Court against the Insurers under the hull and machinery policies. In his judgment handed down on 1 July 2016, Mr Justice Knowles ruled upon five main issues:
1. Was the notice of abandonment given too late?
The fire broke out on 23 August 2012. The NOA was given on 1 February 2013.
Mr Justice Knowles initially considered the meaning of the wording of section 62(3) of the Marine Insurance Act 1906 (MIA) which provides that the NOA ‘must be given with reasonable diligence after the receipt of reliable information of the loss, but where the information is of a doubtful character the assured is entitled to a reasonable time to make inquiry… ’.
The Court noted Roche J’s statement in George Cohen v Standard Marine Insurance (1925) 21 Lloyd’s Rep 30, that: “the assured cannot postpone his election, if all the facts are known, merely because opinions may fluctuate at all events as to the results or proper conclusion to be drawn from the facts.”
This was a case however in which in Mr Justice Knowles’ judgment, “the nature of the casualty was such that achieving reliable information of the loss would be a complex task and take time”. The Court placed particular emphasis on the fact that owners throughout the period from the casualty to the giving of NOA were in receipt of conflicting quotations from surveyors involved both on their behalf and that of the underwriters, but also from experienced shipyards on the estimated costs of repairs, including, importantly, yards consulted by the underwriters.
2. Should pre-NOA expenses count towards a CTL?
The issue of whether pre-NOA expenses should count towards a CTL has attracted a lot of attention from the legal and insurance market as existing case law has not explicitly dealt with it in detail.
The Court found no basis on the wording of clause 19 of the Institute Time Clauses for limiting the cost of recovery and repair to recovery and repair after NOA, differentiating a constructive total loss from the right to claim for a constructive total loss, which are two distinct concepts. It held, therefore, pursuant to a textual interpretation of Clause 9.2 and 19.2 of the Institute Time Clauses (1/10/83) and section 60 of the MIA, that pre-NOA expenses should be included in a CTL calculation, reiterating that a NOA is not an essential ingredient of a constructive total loss.
The Insurers denied liability based on two grounds. In arguing that pre-NOA expenses should not count towards a CTL, they proposed that what they termed a ‘protective NOA’ should be tendered prior to incurring the costs of recovery and repair in cases where it was possible that the vessel might become a CTL. The Court dismissed this out of hand observing that, under the clear provision of section 62(2) of the MIA, once a NOA is accepted ‘the abandonment is irrevocable.’
Secondly, the Insurers also argued that the phrase ‘future salvage operations’ in section 60(2)(ii) of the MIA suggests that costs already incurred should not be taken under consideration. Mr Justice Knowles disagreed, partly departing from two previous decisions, (Helmville Ltd -v- Yorkshire Insurance Company Lt [1965] 1 Lloyd’s Rep 361 (the “MEDINA PRINCESS”) and Hall -v- Hayman (1912) 17 Comm Cas 81), stating that the phrasing is not restrictive but instead the legislature’s intention was simply to (also) take into account the expenses of future salvage operations rather than exclude expenses already incurred prior to tendering the NOA.
3. Specifically amongst pre-NOA expenses, should SCOPIC remuneration (after Article 13 payments have been taken into account) count towards a CTL calculation?
The Court further considered whether SCOPIC liability is to be taken into account as a cost of recovery for the purposes of a CTL. Mr Justice Knowles considered the effect of Clause 15 of the SCOPIC and in accordance with ordinary principles of construction he held that that it is an indivisible part of the salvage operations arising from the casualty and as such must be included in the calculation of a CTL.
4. Were the costs for a standby tug reasonably incurred?
The Owners had employed the services of a standby tug for the period the Vessel remained in the Gulf of Suez, in the event, for about four months.
The Insurers argued that the size and rate of the tug was excessive as the casualty only required standby services which a smaller tug could perform.
The Court gave due consideration to the specific nature of the tug market, salvors’ requirement to deliver the vessel to a tug of sufficient capabilities on completion of the LOF, the condition of the Vessel and the purposes for which a tug was required and held, on the evidence, that it was reasonable and necessary to engage a tug of that size, although not for the entire period of four months, as owners should have explored other possibilities in the meantime, but for around half that time.
5. What margin of general contingency should be allowed?
Both parties accepted the need to allow a contingency but disagreed on the percentage to be applied. Mr Justice Knowles considered Flaux LJ’s observations in the recent case “BRILLANTE VIRTUOSO”, a case in which the Owners were also represented by Hill Dickinson, and applied a 10% contingency agreeing with Owners’ approach. The Court emphasized the necessity of allowance for uncertainty as a result of the nature of the casualty, the location of the Vessel and the range of estimates and quotations, which undermined the arithmetical test applied by the Insurers.
It is worth noting that, in the “BRILLANTE VIRTUOSO”, Flaux LJ held that, in calculating quantum for assessing if a vessel can be declared a CTL, there might well be uncertainty about the nature and extent of damage and that the Court would, therefore, allow a ‘large margin’ in assessing the cost of repair.
Thus, Mr Justice Knowles held that the NOA was effective and that the vessel, on the evidence, was a CTL. It is likely that the Insurers will seek leave to appeal on various grounds from the Court of Appeal after Mr Justice Knowles refused leave to appeal.
Source: Hill Dickinson
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Monday, 29 August 16
THE 5000 GAR THERMAL COAL INDEX HAS STRENGTHENED BY 9.90% SINCE JANUARY
COALspot.com: A rally in thermal coal prices over the past few months, after years of decline, is still continuing upward and it is expected to ral ...
Monday, 29 August 16
THE FREIGHT MARKET WAS STEADY AND FIRM THIS PAST WEEK; BCI ROSE 18.74%
COALspot.com: The Baltic Exchange, tracking rates for ships carrying dry bulk commodities rose and ending in a positive note this past week except ...
Friday, 26 August 16
WEEKLY US COAL OUTPUT UP 0.7% W/W TO 16 MMST: EIA
COALspot.com – U.S., the world’s second largest coal producers have produced approximately totalled an estimated 16 million short tons ...
Thursday, 25 August 16
SUPRAMAXES ARE BEING FIXED IN REGION OF $9000
Supramax
Due to Chinese coal imports which continues to source much of the tonnage in SE Asia combined with a good flow of mineral exports ex Aus ...
Wednesday, 24 August 16
MARKET INSIGHT
Brazil and the world bid farewell on Sunday to the first Olympic Games in South America in the midst of a finale meant to be both one last bash and ...
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Showing 2306 to 2310 news of total 6871 |
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- TNB Fuel Sdn Bhd - Malaysia
- SMC Global Power, Philippines
- Bayan Resources Tbk. - Indonesia
- European Bulk Services B.V. - Netherlands
- McConnell Dowell - Australia
- Samtan Co., Ltd - South Korea
- Gujarat Electricity Regulatory Commission - India
- Vedanta Resources Plc - India
- MS Steel International - UAE
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Carbofer General Trading SA - India
- Coastal Gujarat Power Limited - India
- Bhatia International Limited - India
- The University of Queensland
- Interocean Group of Companies - India
- Baramulti Group, Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Eastern Coal Council - USA
- Siam City Cement - Thailand
- Dalmia Cement Bharat India
- Oldendorff Carriers - Singapore
- San Jose City I Power Corp, Philippines
- Straits Asia Resources Limited - Singapore
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Thiess Contractors Indonesia
- Agrawal Coal Company - India
- Pendopo Energi Batubara - Indonesia
- New Zealand Coal & Carbon
- Bharathi Cement Corporation - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Larsen & Toubro Limited - India
- Malabar Cements Ltd - India
- Grasim Industreis Ltd - India
- ASAPP Information Group - India
- Billiton Holdings Pty Ltd - Australia
- Electricity Authority, New Zealand
- Indika Energy - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Ministry of Mines - Canada
- Sindya Power Generating Company Private Ltd
- Sinarmas Energy and Mining - Indonesia
- Directorate Of Revenue Intelligence - India
- Manunggal Multi Energi - Indonesia
- Marubeni Corporation - India
- Maharashtra Electricity Regulatory Commission - India
- VISA Power Limited - India
- Kaltim Prima Coal - Indonesia
- Star Paper Mills Limited - India
- Cement Manufacturers Association - India
- Sojitz Corporation - Japan
- Global Coal Blending Company Limited - Australia
- Planning Commission, India
- Bhushan Steel Limited - India
- Latin American Coal - Colombia
- Indo Tambangraya Megah - Indonesia
- SN Aboitiz Power Inc, Philippines
- Heidelberg Cement - Germany
- Commonwealth Bank - Australia
- ICICI Bank Limited - India
- Ministry of Finance - Indonesia
- CNBM International Corporation - China
- LBH Netherlands Bv - Netherlands
- Africa Commodities Group - South Africa
- GMR Energy Limited - India
- Minerals Council of Australia
- The State Trading Corporation of India Ltd
- Savvy Resources Ltd - HongKong
- India Bulls Power Limited - India
- Goldman Sachs - Singapore
- Neyveli Lignite Corporation Ltd, - India
- Ceylon Electricity Board - Sri Lanka
- Kobexindo Tractors - Indoneisa
- South Luzon Thermal Energy Corporation
- IEA Clean Coal Centre - UK
- Trasteel International SA, Italy
- Orica Mining Services - Indonesia
- Global Business Power Corporation, Philippines
- Madhucon Powers Ltd - India
- Vizag Seaport Private Limited - India
- Altura Mining Limited, Indonesia
- Energy Link Ltd, New Zealand
- Sree Jayajothi Cements Limited - India
- Binh Thuan Hamico - Vietnam
- Kumho Petrochemical, South Korea
- Cigading International Bulk Terminal - Indonesia
- SMG Consultants - Indonesia
- Essar Steel Hazira Ltd - India
- Bukit Baiduri Energy - Indonesia
- Power Finance Corporation Ltd., India
- Kepco SPC Power Corporation, Philippines
- Central Electricity Authority - India
- Indogreen Group - Indonesia
- The Treasury - Australian Government
- Miang Besar Coal Terminal - Indonesia
- Aditya Birla Group - India
- TeaM Sual Corporation - Philippines
- Bulk Trading Sa - Switzerland
- Uttam Galva Steels Limited - India
- Ministry of Transport, Egypt
- CIMB Investment Bank - Malaysia
- Jindal Steel & Power Ltd - India
- PTC India Limited - India
- Salva Resources Pvt Ltd - India
- Lanco Infratech Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Electricity Generating Authority of Thailand
- Antam Resourcindo - Indonesia
- Orica Australia Pty. Ltd.
- Mercuria Energy - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Sarangani Energy Corporation, Philippines
- Parry Sugars Refinery, India
- Aboitiz Power Corporation - Philippines
- Simpson Spence & Young - Indonesia
- Renaissance Capital - South Africa
- PowerSource Philippines DevCo
- OPG Power Generation Pvt Ltd - India
- GVK Power & Infra Limited - India
- IHS Mccloskey Coal Group - USA
- Attock Cement Pakistan Limited
- Semirara Mining and Power Corporation, Philippines
- Makarim & Taira - Indonesia
- Maheswari Brothers Coal Limited - India
- Mercator Lines Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Singapore Mercantile Exchange
- Posco Energy - South Korea
- Ind-Barath Power Infra Limited - India
- Iligan Light & Power Inc, Philippines
- Indonesian Coal Mining Association
- GN Power Mariveles Coal Plant, Philippines
- Romanian Commodities Exchange
- Bank of Tokyo Mitsubishi UFJ Ltd
- Kartika Selabumi Mining - Indonesia
- Intertek Mineral Services - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Gujarat Sidhee Cement - India
- Edison Trading Spa - Italy
- Kohat Cement Company Ltd. - Pakistan
- Indian Oil Corporation Limited
- Bangladesh Power Developement Board
- Karaikal Port Pvt Ltd - India
- Australian Commodity Traders Exchange
- Chamber of Mines of South Africa
- Vijayanagar Sugar Pvt Ltd - India
- Timah Investasi Mineral - Indoneisa
- Metalloyd Limited - United Kingdom
- Australian Coal Association
- Riau Bara Harum - Indonesia
- Petron Corporation, Philippines
- PNOC Exploration Corporation - Philippines
- Holcim Trading Pte Ltd - Singapore
- Mjunction Services Limited - India
- Tata Chemicals Ltd - India
- Bukit Makmur.PT - Indonesia
- International Coal Ventures Pvt Ltd - India
- Economic Council, Georgia
- Global Green Power PLC Corporation, Philippines
- Ambuja Cements Ltd - India
- Borneo Indobara - Indonesia
- Meenaskhi Energy Private Limited - India
- Sical Logistics Limited - India
- Barasentosa Lestari - Indonesia
- Price Waterhouse Coopers - Russia
- Port Waratah Coal Services - Australia
- Rashtriya Ispat Nigam Limited - India
- Chettinad Cement Corporation Ltd - India
- Wilmar Investment Holdings
- Anglo American - United Kingdom
- Tamil Nadu electricity Board
- Indian Energy Exchange, India
- Georgia Ports Authority, United States
- Medco Energi Mining Internasional
- Merrill Lynch Commodities Europe
- Rio Tinto Coal - Australia
- AsiaOL BioFuels Corp., Philippines
- Kideco Jaya Agung - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Alfred C Toepfer International GmbH - Germany
- Gujarat Mineral Development Corp Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Wood Mackenzie - Singapore
- Parliament of New Zealand
- Jorong Barutama Greston.PT - Indonesia
- Semirara Mining Corp, Philippines
- London Commodity Brokers - England
- Meralco Power Generation, Philippines
- Videocon Industries ltd - India
- Mintek Dendrill Indonesia
- Energy Development Corp, Philippines
- Independent Power Producers Association of India
- Bhoruka Overseas - Indonesia
- Sakthi Sugars Limited - India
- Toyota Tsusho Corporation, Japan
- Central Java Power - Indonesia
- Banpu Public Company Limited - Thailand
- PetroVietnam Power Coal Import and Supply Company
- Xindia Steels Limited - India
- Formosa Plastics Group - Taiwan
- Karbindo Abesyapradhi - Indoneisa
- Leighton Contractors Pty Ltd - Australia
- Coalindo Energy - Indonesia
- Deloitte Consulting - India
- Siam City Cement PLC, Thailand
- Thai Mozambique Logistica
- Jaiprakash Power Ventures ltd
- Coal and Oil Company - UAE
- Eastern Energy - Thailand
- Standard Chartered Bank - UAE
- GAC Shipping (India) Pvt Ltd
- Globalindo Alam Lestari - Indonesia
- Therma Luzon, Inc, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Asia Pacific Energy Resources Ventures Inc, Philippines
- White Energy Company Limited
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